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Weekend Briefing No. 347
Welcome to the weekend.
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0.69—Americans with incomes under $25,000 have their taxes audited by the Internal Revenue Service at a rate of 0.69 percent annually, which is significantly higher than the rate for filers with incomes over $500,000, which is 0.53 percent.
26—Twenty-six percent of Americans get their news from YouTube. Americans are about evenly divided between those who say they go there primarily to get opinions and social commentary (51 percent) and those who are seeking information and facts (48 percent).
175 M—The U.S. Securities and Exchange Commission paid about $175 million to 39 whistle-blowers in the past year, setting a record for a program that rewards tipsters for helping the agency go after corporate wrongdoing.
Stakeholder Capitalism Policy
In a white paper containing draft legislation and regulations, B Lab and The Shareholder Commons propose substantial amendments to federal law that would establish new fiduciary obligations for corporations and institutional investors, and impose related substantive requirements on investors as part of implementing what the paper describes as Benefit Governance. Among the proposals: (1) Mandate new fiduciary duties for trustees of institutional investors regarding the economic, social and environmental effects of their decisions on the interests of their beneficiaries; (2) Implement new requirements that would push institutional investors to engage with and be responsive to their underlying beneficiaries, and inform such beneficiaries in advance of planned proxy vote decisions and other actions so that the beneficiaries can provide input to the asset manager; (3) Mandate that all business entities—public and private—engaged in interstate commerce operate and incorporate as benefit corporations; (4) Expand disclosures for investment companies, ERISA plans, and large companies regarding social and environmental issues; (5) Require compensation committees of large companies to incorporate consideration of stakeholder concerns into their decision-making processes and compensation design; (6) Design tax laws and financial regulations to discourage compensation based on equity or portfolio value that does not account for systemic effects of assets under management; (7) Reverse recently adopted SEC rules that may make it more difficult for shareholders to bring shareholder proposals; (8) Establish safe harbors for coordinated shareholder action in pursuit of sustainability guardrails or similar restrictions on corporate behavior that preserve social, economic and environmental systems. B Lab (98 minutes)
Launching During Coronavirus
Americans are starting new businesses at the fastest rate in more than a decade, according to government data, seizing on pent-up demand and new opportunities after the pandemic shut down and reshaped the economy. The jump may be one sign that the pandemic is speeding up “creative destruction,” the concept popularized by economist Joseph Schumpeter in the 1940s to describe how new, innovative businesses often displace older, less-efficient ones, buoying long-term prosperity. Applications for the employer identification numbers that entrepreneurs need to start a business have passed 3.2 million so far this year, compared with 2.7 million at the same point in 2019, according to the U.S. Census Bureau. Many of these won’t pan out. More than half of new employer businesses fail within five years, he said. What’s more, small-business revenue was down 21 percent as of mid-September versus January levels. The question is: Are they jumping on market opportunities that have emerged rapidly given the current environment? Is this just an example of necessity being the mother of invention? Maybe both? Wall Street Journal (15 minutes)
Our client Good Nature Agro, a Zambian company working from end-to-end within the specialized legume value chains, announced today that it closed Series A equity funding totaling $2.1 million. Goodwell Investments led the round with participation from existing seed investors Global Partnerships and FINCA Ventures. This investor capital accelerates Good Nature Agro’s ability to build up essential value-add processing infrastructure in Central and Eastern Zambia, to accelerate the growth of their full-farm extension services for smallholders, and connect these farmers to large-scale agribusinesses and food processors seeking hassle-free sourcing, as well as to further their seed-breeding program. A social enterprise, Good Nature Agro (“GNA”) partners with smallholder farmers to improve their productivity through soil-enriching legume farming and links them to high-value legume markets to move farmers firmly into the middle class. Good Nature Agro farmers currently net 3 to 4 times as much as they earn for cash crops, like maize, on the same land. Legumes are valuable to farmers’ long-term because they increase soil fertility by replacing nitrogen used by other crops, and they are resilient against climate change. In 2020, GNA will support 15,000 farmers with vital extension services, customized input packages, financial planning and goal setting frameworks, and guaranteed offtake contracts. We were proud to support Good Nature Agro in this round of financing. Goodwell (5 minutes)
How is COVID-19 shaping how we shop? (1) Online shopping is here to stay, and Millennials as well as high-earners are leading the way. (2) Consumers are switching brands at unprecedented levels. Thirty-six percent of consumers are trying a new product brand, and 25 percent are incorporating a new private-label brand. Of consumers who have tried different brands, 73 percent intend to continue to incorporate the new brands into their routine. Gen Z and high-earners are most prone to switching brands. (3) Health and safety is changing the way we shop. U.S. consumers have already started to change their behavior in response to hygiene concerns. Technologies that enhance hygiene, particularly contactless activities such as food and grocery delivery and curbside pickup, are taking off. There is strong intent to continue contactless activities across the United States. (4) Focus on the essentials. Around 40 percent of U.S. consumers have reduced spending in general, and they expect to continue to cut back on nonessentials specifically. This reality reflects profound discomfort about the state of the economy. McKinsey (11 minutes)
Scientists developing a compact version of a nuclear fusion reactor have shown in a series of research papers that it should work, renewing hopes that the long-elusive goal of mimicking the way the sun produces energy might be achieved and eventually contribute to the fight against climate change. Construction of a reactor, called Sparc, which is being developed by researchers at the Massachusetts Institute of Technology and a spinoff company, Commonwealth Fusion Systems, is expected to begin next spring and could use fusion energy to generate electricity, beginning in the next decade. Like a conventional nuclear fission power plant that splits atoms, a fusion plant would not burn fossil fuels and would not produce greenhouse-gas emissions. But its fuel, usually isotopes of hydrogen, would be far more plentiful than the uranium used in most nuclear plants, and fusion would generate less, and less dangerous, radioactivity and waste than fission plants. Fusion, in which lightweight atoms are brought together at temperatures of tens of millions of degrees to release energy, has been held out as a way for the world to address the climate-change implications of electricity production. If they can pull this off, it will be huge! New York Times (7 minutes)
Synthetic biologists are gradually learning how to program the code of life the way that computer experts have learned to program machines. If they can succeed—and if the public accepts their work—synthetic biology stands to fundamentally transform how we live. Broadly defined, synthetic biology takes an engineering approach to shaping life for specific ends, from enzymes to microbes to, eventually, the human genome itself. The difference between the past few centuries of breeding plants and animals and today's synthetic biology is the control scientists are increasingly able to maintain over the messy stuff of life, thanks to advances in sequencing genes and, increasingly, synthesizing them. They can make deliberate, precise edits to DNA through new tools like CRISPR or even create genetic matter in entirely new combinations. For synthetic biologists, designing and building living systems is the best way to fully understand the principles of life. Yet synthetic biology's practical value is just as important, if not more so, than its pure scientific value. Instead of imposing ourselves on nature, as humans have done since the Industrial Revolution, we can harness it and shape it to our own ends. Synthetic biology startups raised some $3 billion through the first half of 2020, up from $1.9 billion for all of 2019, as the field brings the science of engineering to the art of life. Axios (6 minutes)
Does Remote Work, Work?
What do CEOs really think about remote work? (1) “I don’t see any positives. Not being able to get together in person, particularly internationally, is a pure negative.” Reed Hastings, Netflix (2) “In all candor, it’s not like being together physically. And so I can’t wait for everybody to be able to come back into the office. I don’t believe that we’ll return to the way we were because we’ve found that there are some things that actually work really well virtually.” Tim Cook, Apple (3) “Most of us are not hermits…We need that social interaction, not only from a business standpoint but truly from a kind of personal-development standpoint.” Jim Fish, Waste Management (4) “What I worry about the most is innovation. Innovation is hard to schedule—it’s impossible to schedule.” Ellen Cullman, Carbon, Inc. Wall Street Journal (8 minutes)
“When You Finish Saving the World” by Jesse Eisenberg—a playwright, author, and Oscar-nominated actor Jesse Eisenberg—tells the moving and evocative story of three individuals working to understand each other and themselves: Nathan, a father learning to connect with his newborn son; Rachel, a young college student seeking to find her place in a relationship and in life, before marriage to Nathan; and Ziggy, their son, a teenager hoping to figure out where he came from and where he’s headed. The shifts between time frames in these characters’ lives span more than a decade, and eloquently capture the complexities of growing up, having children and fitting in. Amazon
Most Read Last Week
October Playlist—My monthly playlist.
Gen Z—This is a report on Gen Z by ZebraIQ (a Gen Z consultancy).
Going for Broke—It took decades, but Chuck Feeney, the former billionaire co-founder of retail giant Duty Free Shoppers, has finally given all his money away to charity.
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Whether you think you can or think you can't ... You're right. -Henry Ford
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